Salesforce (NYSE:CRM) stock is trending, and it is tumbling about 18% today. The pullback is coming after the tech giant’s second-quarter revenue guidance came in below analysts’ average estimate. As a consequence, a number of experts are questioning whether the firm can compete effectively in the artificial intelligence (AI) focused tech landscape.
Salesforce develops and markets software for companies and governments.
Salesforce’s Multiple Misses
The tech giant expects its sales to be between $9.2 billion and $9.25 billion. That’s below analysts’ prior average estimate of $9.34 billion. Salesforce now expects its revenue to increase 7% % to 8% during the current quarter compared to the same period a year earlier.
Also disappointing the Street was Salesforce’s miss on a widely followed metric called current remaining performance obligations (CRPO) bookings. Last quarter, the conglomerate’s CRPO bookings increased 10% compared with Q1 of the previous year. Analysts, on average, had expected the CRPO bookings to jump 11.9% year-over-year.
Finally, Salesforce reported Q1 revenue of $9.13 billion, slightly below analysts’ average outlook of $9.17 billion. This was the first time that the company’s quarterly top line missed the mean estimate in 18 years.
Banks Pan Salesforce’s Results
A number of major banks reacted quite negatively to Salesforce’s results and guidance. Calling the firm’s Q1 bookings “weak,” Morgan Stanley wrote that the firm’s AI initiatives are not yet meaningfully boosting its revenue. Consequently, the bank believes investors will worry about the company’s ability to effectively compete in the enterprise software market.
Barclays reported that Salesforce’s business appeared to deteriorate starting at the end of March before becoming even weaker last month. Finally, BMO Capital called the company’s execution “poor” and warned that it could miss analysts’ average estimates going forward.
The Price Action of Salesforce Stock
Heading into today, the shares had dropped 2.5% in the previous five days and 12% in the last three months.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
